Why is raising the minimum wage generally ineffective?
A) Most employers purchase labor on the black market, where the binding price floor is not present.
B) The minimum wage is an amount suggested by the government, and employers are under no obligation to pay their employees the suggested basic wage.
C) The minimum wage is usually set below the prevailing equilibrium wage and is frequently non-binding.
D) Employees are often unconcerned with their wages and care more about the benefits that come with the job.
E) Most employees who hold low-wage jobs work in the black market, where the binding price floor does not exist.

Question

Quizplus · Accepted Answer

The minimum wage is often set below the prevailing equilibrium wage, which means that it is frequently non-binding. This means that employers may already be paying their employees at a rate higher than the minimum wage, making the increase in minimum wage ineffective. Additionally, some employers may respond to an increase in minimum wage by reducing worker hours or scaling back hiring, which can have negative effects on employment rates.

Why Is Raising the Minimum Wage Generally Ineffective